Up and Down Wall Street, Part 2

T ime's up on the patents covering many of the drug industry's most profitable products. But
Bristol-Myers Squibb
might not be one of the losers.

The Manhattan-based pharmaceutical giant points to a federal judge's order that obliges it to take action that effectively could add three years to its lucrative monopoly on Taxol, a cancer drug.

As reported in last week's Barron's cover story, "Healthy Prospects ," Bristol last year sold $1.48 billion worth of the drug, which is a preferred treatment for breast and ovarian tumors. Most of that dropped down to the company's profit line.

IVAX
, a Miami firm, wants to sell a generic form of Taxol, and expected Food and Drug Administration approval this summer. On that prospect, IVAX shares soared.

On August 11, however, Bristol-Myers was sued in federal court in Los Angeles by American Bioscience, a private firm based in Santa Monica. The plaintiff asserted that it had a patent on a new dosage form of paclitaxel (Taxol's chemical name). Quickly, Bristol bent to American Bioscience's demand that the big drugmaker list the small company's patent in an FDA compendium known as the Orange Book.

Under FDA regulations, this could delay approval of any generic Taxol for up to 30 months. In other words, the action forced upon Bristol could add billions of dollars to its profits. The news was great for Bristol shares, but deadly to those of IVAX, which slid from 53 to the high 20s. At those levels, Larry Feinberg, who runs Oracle Partners, says he loaded up. IVAX has other generic drugs in its pipeline, he notes, and, more interestingly, Feinberg thinks the Orange Book listing of Taxol won't hold up under legal and political scrutiny.

However, Crystal Wyand, a spokeswoman for the FDA's Center for Drug Evaluation and Research, says the agency will indeed hold off generic approvals in the face of a valid American Bioscience patent. "It's really up to the companies to challenge each other," she says.

And that's what IVAX will do. On September 6, District Judge William Matthew Byrne will hear the objections of IVAX and other generic firms to Bristol's Orange Book action. Neil Flanzraich, IVAX vice chairman and president, views the suit against Bristol with suspicion. "Since we've learned about this listing of this new patent," says Flanzraich, "we've been trying to find out more about the circumstances under which it was done."

American Bioscience's chief executive, Dr. Patrick Soon-Shiong, is a surgeon who caused a stir in 1993 when he announced a potential cure for diabetes on CNN, with his transplant of insulin-producing cells from a pig into a human. But his report, published in the medical journal Lancet, was denounced as "hype" by officials of the American Diabetes Association. Indeed, the procedure failed.

Soon-Shiong got a boost into the generic-drug business when American Bioscience acquired the injectable drug business of Japan's Fujisawa in 1998.

Under the proposed order that Bristol-Myers and American Bioscience submitted for Judge Byrne's approval, Bristol-Myers agrees to make the potentially lucrative Orange Book listing. In addition, both parties ask the judge to order Bristol-Myers to make the listing and to leave it on the books. Acting under a judge's orders, of course, Bristol-Myers couldn't be accused of antitrust collusion.

"The Orange Book filing was initiated by the court," says Bristol-Myers Squibb spokeswoman Nancy Goldfarb. "We were ordered by the court to list the patent in the Orange Book and we complied." American Bioscience's Soon-Shiang didn't return a phone message left Friday by Barron's .

O ver the past year,
AT&T
has gone from being a stock safe enough for widows and orphans to being one liable to create widows and orphans. As the firm's dominance of domestic long distance has proven a depleting asset, AT&T shares have sunk from $61 to $31, in a humbling that is recounted by our colleague Cheryl Strauss Einhorn in Overrated Messiahs .

The selloff may be overdone, says Barron's Roundtable member and all-around good guy Mario Gabelli. Investors are overlooking the value of AT&T's wireless business, argues Mario, who figures that value at half of AT&T's current share price, by putting a 20-times multiple on the cash flow he foresees for the wireless business two years out.

What should push the value of the wireless business even higher, he says, is the U.S. launch of Internet-style services like the one offered by Japan's DoCoMo. DoCoMo has 10 million customers using its iMode cell phones, many of them kids. Wireless offers carriers like AT&T the chance to control the Internet's interface to their customers -- a control the phone companies ceded to the likes of
America Online
and
Microsoft
, in the wired world. Of course, regulations forced phone firms to carry services like AOL on the wires. But wireless networks operate under no such obligation, so they can demand a piece of the action as the price of gaining access to their customers.

When wireless surfing becomes widespread, says Mario, it's conceivable that AT&T and other wireless carriers could get transaction and display fees whenever you trade a stock from your wireless device, or purchase an album of
MP3
music.

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